ForexLive European morning FX news wrap: Sterling falls ahead of key Brexit parliamentary vote
Forex news from the European morning session - 14 February 2019
- Brexit: John Bercow selects Labour, SNP, Soubry amendments for voting
- UK PM spokesman: No-deal Brexit remains on the table
- BOE's Vlieghe: Would raise rates after a no-deal Brexit if needed
- Eurozone Q4 GDP second reading +0.2% vs +0.2% q/q prelim
- BOE's Vlieghe: Loose policy response likely more apt in the event of no-deal Brexit
- Russia's Novak: No OPEC+ output proposals in light of Venezuela crisis
- China: No information on high-level trade talks currently
- EU mulling retaliatory tariffs in reaction to potential US auto tariffs - report
- Germany Q4 preliminary GDP 0.0% vs +0.1% q/q expected
- Germany January wholesale price index -0.7% vs -1.2% m/m prior
- US-China trade negotiations to be extended? Not so fast...
- NZD leads, GBP lags on the day
- European equities slightly higher; E-minis up 0.3%
- US 10-year yields down 1.6 bps to 2.686%
- Gold down 0.1% to $1,304.70
- WTI up 0.9% to $54.38
- Bitcoin down 0.3% to $3,561
Markets are basically fixated on two themes at the moment and that is of US-China trade talks in Beijing and Brexit with a key vote ahead for the government. With regards to the former, higher-level trade talks have begun today but as expected, both US and Chinese officials are keeping mum on the matter so far.
That said, markets remain cautiously optimistic after reports suggest that Trump is looking to postpone negotiations and the tariffs deadline by 60 days. That helped saw the aussie and kiwi surge during Asian trading and both currencies remained bid in the European morning.
NZD/USD began the session around 0.6830 before inching up to a high of 0.6844 as the dollar was pressured at the start of trading. The pair then tracked lower to 0.6810-20 levels as the greenback recovered some poise but is back up now to 0.6830 levels.
The dollar's see-saw run in the European morning also saw it move from a low of 1.3230 against the loonie to a high of 1.3274 later on. However, price ran into resistance from the 100-hour moving average again and is trading around 1.3260 levels currently.
EUR/USD also saw similar action as it raced to a high of 1.1295 despite the fact that German Q4 GDP ground to a standstill. The pair then retraced gains to test bids around 1.1250 before bouncing back to trade between 1.1260-70 levels at the moment.
However, the main mover on the session was the pound with cable racing to a high of 1.2878 where it encountered some resistance near 1.2880 before slipping to 1.2840 after the dollar recouped earlier losses. But the pound was pressured in the coming hours as reports continue to suggest that ERG members are seen to not support the government's motion (to continue negotiations and seeking changes to the backstop) in the key vote later today.
That helped to send the pound lower with cable falling to 1.2800 where it trades just above currently. As it stands, the government losing the vote here would be a big blow to May's plan as she seeks to buy time to negotiate a last minute deal with European leaders next month.
Failure to get enough votes here is a bad signal of confidence for any Brexit deal she is going to bring back in the coming weeks. That said, it could pave the way for parliament members to start backing the Cooper amendment, and that may be a silver lining for the pound in the next two weeks.
Looking ahead, we'll have US retail sales and PPI figures to drive near-term dollar sentiment but I would expect the current choppy conditions to still prevail with trade talks still ongoing in Beijing.